Sir Charles on the great American sport of granny-starving, as applauded by The Village:

Someday someone is going to do a study on the psychological attitudes of the worthless media elite of our time and their obsession with making life more miserable for large swaths of their fellow Americans. The degree to which Saletan, Dancin’ Dave Gregory, David Brooks, and virtually the entirety of Fred Hiatt’s funny pages (save Eugene Robinson, Harold Meyerson, and E.J. Dionne), get tumescent over granny having to move in with the kids because she can’t afford to live on her own is really like nothing I’ve ever seen. It’s gratuitous cruelty at the hands of people who have far more than they deserve and confuse this status with wisdom

You cannot slash taxes AND slash spending AND still reduce the deficit. It’s mathematically impossible. You can no more reduce the deficit this way than you can walk to the moon or skin-dive the Marianas Trench.

And if you try it, we’ll be in another recession in a heartbeat. Hell, with three straight months of falling consumer spending, we might be heading into another one even if you don’t.

This really is the era of lowered expectations. I used to pray for deliverance from extremist ideologues. Now I just pray for deliverance from people who can’t count.

Dana Milbank devoted his [Washington Post] column to the disenchantment of progressives with the current political situation. At one point he comments that “the still-lumbering economy has depressed President Obama’s supporters.”

While this is no doubt true, it is worth mentioning that just about all progressives said at the time that the stimulus would be inadequate to restore the economy to a healthy growth path. The collapse of the housing bubble destroyed close to $1.2 trillion in annual demand from construction and consumption. At its peak in 2009 and 2010 the stimulus only replaced about $300 billion in annual spending.

It is discouraging to see so many people suffering unnecessarily, but this outcome is exactly what our analysis predicted at the time. Unfortunately, having a track record of being right is not generally a factor in determining which views carry weight in Washington policy debates.

Somebody tell me again how the U.S. is a meritocracy. Or, as Driftglass famously observed:

Wednesday, May 30, 2012 8:00 pm

Paul Ryan, who gets way more credit than he deserves for even being able to count, let alone devise a deficit-reduction plan that actually, you know, reduces the deficit, says something remarkably ahistorical here:

We wonder if we will be the first generation in American history to leave our children with fewer opportunities and a less prosperous nation than the one we inherited.

Can this possibly be true? Didn’t parents in the depth of the Depression wonder the same thing? Didn’t the mothers and fathers who worked in the coal mines in the early years of the 20th century see pretty much the same future for their children and grandchildren? Didn’t the farmers ground up in the Panics of 1873 and 1837 — to name only two major events that occurred while the country pursued the policies that Ryan’s “budget” so deeply flattered — feel pretty damned hopeless of what would happen to their kids? Didn’t we ship kids west from the cities on orphan trains? Wasn’t this the normal state of affairs for generation after generation of African Americans?

You know when people began to feel that they could leave their children with more opportunities than they had? When government got involved, that’s when, and when common people began to feel that the government was on their side, and not the wholly owned subsidiary of the wealthy and the privileged. The farmers started to feel it when the Morrill Act established land grant colleges. The miners began to feel it when unionization fought to make their jobs slightly less hellish and when government got behind that effort. The farmers began to feel it when the Progressives began to force change at the beginning of the last century. Everybody felt it with the election of Franklin Roosevelt and the defeat of Hooverian economics, for which Paul Ryan seems overly nostalgic. And that feeling really took off in the 1950’s, when government passed the GI Bill and built the interstate highways, and made college affordable generally to the children and grandchildren of the people who won World War II like, say, me. And when we recognized that the death of a parent need not blight the hopes and dreams of his children, who would be allowed the opportunity of an education through the survivor benefits provided by Social Security, like, say, Paul Ryan was. The notion that we will leave a brighter day for our kids is a relatively recent phenomenon, and it is one that was not possible without the intervention of the government, and it is one from which Paul Ryan profited so handsomely that he is now in a position to claim a “moral obligation” to deny it to everyone else. What a country.

Thursday, February 2, 2012 9:25 pm

Those wild-eyed liberals at The Economist apparently have figured out that the sky is blue:

D.B. Echo, Another Monkey

So, here’s the thing. The debate we had about the stimulus probably should have been a lot like the book Mr [Mike] Grabell has written: a detailed investigation of what does and doesn’t work in stimulus spending and whether the government really can jump-start a promising industry through investments, tax breaks and industrial policy. But that wasn’t the debate we had. Instead we had a debate about the very concept of whether the government ought to spend money counter-cyclically during a recession in order to keep the economy from collapsing, or whether it should tighten its belt along with consumers and businesses in order to generate confidence in the financial markets and allow markets to clear. We had a debate about whether governments should respond to recessions with deficit spending or austerity.

That was the debate we had. And what’s interesting about this particular moment is that while Mr Grabell is writing about what did and didn’t work in the stimulus, and Mr Obama is staying away from the topic for political reasons, out there on the barricades what’s happening is that the entire argument that governments should engage in austerity appears to be collapsing.

How about that.

There are times when austerity absolutely is the correct approach. This is absolutely not one of them. But our “leaders” continue to insist that the sky is pink with purple polka-dots.

Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.

I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation. …

Job one for the 12 [members of Congress who will be defining deficit-reduction details] is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.

But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.

Buffett, in simple language, explains just how rigged the system is in favor not only of the wealthy but also in favor of those whose income is derived from investments rather than labor.

One of the things that has kept occuring to me over the last couple of weeks — and with particular potency on Thursday as the stock market tanked — is the consistent uselessness of the American business community in matters of policy. Business groups like the Chamber of Commerce continuously push to elect Republicans to office despite the fact that they are committed to harmful cuts in government expenditures, cuts that will ultimately harm the Chamber’s own constituency. The Wall Street community, which got its collective nose out of joint over the all too tepid criticisms levelled at it by President Obama, helped to elect Republicans so out of touch with financial reality that they allowed the prospect of a governmental default to spook the markets. All of this despite the fact that historically the economy experiences much greater job growth under Democratic administrations and that the stock market has performed far better under Democratic presidents.

Business leaders could have played a useful role in the recent debates over both the move towards austerity and the debt ceiling. It would have been extremely helpful to have arguments made for expansionary policies posited by the business community, which rightly or wrongly, continues to have a ready microphone in the mainstream media, particularly on cable television. They chose instead to sit on the sidelines and let the crazies in the Republican Party have their way. Only after the fact have they reacted to the bad policy decisions foisted on us by the extreme right, past the point where they could have any positive input in the debate.

To be fair to business, not all business groups are alike. The national Chamber of Commerce, which represents primarily the largest corporations while claiming to speak for all business, is so insane some local chambers are disassociating themselves from it, while groups such as the National Federation of Independent Businesses, which represent more small and medium-sized businesses, have been more reality-based.

But the poster’s larger point stands: Big Business has supported political candidates whose party’s performance history is objectively inimical to its interests. It has supported politicians who are killing it, not politicians who have helped it. And that, friends, is one good reason not to run government like business.

Quote of the Day, language edition, from Roch Smith in the comments at Ed’s place. He’s talking about economics but the phenomenon he describes applies to pretty much all our public discourse of late:

I used to try to argue with people who detached meaning from words, but it’s impossible. There are people for whom a legitimate “argument” involves ignoring the meaning of words or imbuing them with a meaning that they do not have, sometimes to the point of making them even the opposite of what they mean.

How do you have a discussion with someone when language is intentionally denied the purpose of conveying meaning? Some people view the purpose of a “debate” as constructing an impenetrable barricade against the intrusion of a new idea. Language is not for getting an idea from one mind to another, it is for keeping preconception unmolested; as such, it need not have any fidelity to meaning. The purpose of a “discussion” for the meaning-snatchers is to gainsay, block and frustrate — abandoning meaning serves that purpose well. But you can’t engage it except as a futility.

It’s like arguing with gibberish. One might as well be arguing with: “You said, ‘Keynes suffocated oranges for the transport of the orbiting oak spoons,’ but his dog collar chastity is more of an aerobic digestion, not the marbled decorum you wrongly espouse. So there!”

Roch poses the question mostly rhetorically, but its answer has real, and pernicious, real-world consequences — consequences that those in Washington who work with words for a living could, but choose not to, ameliorate. (And I know they know better because I trained some of them.)

Let’s say that through a combination of fund-raising prowess, ideological militancy, and personal charisma, Jesse Jackson Sr. is able to assume a position of considerable behind-the-scenes power in the Democratic Party. His sway over elected Democrats is such that he manages to get 95% of the Democratic Congressional delegation, House and Senate, to sign an oath of personal loyalty to his policy goals. Specifically, they pledge that under no circumstances will they ever support cuts in Medicare, Medicaid, Social Security, and other social welfare programs. Jackson believes that any such cuts will affect the poor and people of color disproportionately. Throughout the debate over the budget and debt ceiling, House and Senate Democrats refuse to even consider any proposal that touches any of those programs. It is a non-starter. Full stop. Because they swore an oath to Jesse Jackson that they wouldn’t.

I’m sure you can see through this thin shoe-on-the-other-partisan-foot analogy to Grover Norquist’s “Taxpayer Protection Pledge” that currently holds sway over the GOP. I do think it’s interesting to draw out the hypothetical scenario, though, to underscore a point: Can you even imagine the sheer violence of the [drawers-soiling] that the GOP, Teatards, and Beltway media would be engaged in if the shoe really was on the other foot? If every Democrat had signed a personal oath to an interest group and private citizen that took precedence over their oath to the American people and Constitution?

I’m quite sure someone would have taken a shot — literally — at Jackson by now. But we know, and are more willing by the day to acknowledge publicly, that the congressional GOP and the party base are insane. The more interesting part of this thought experiment to me is what the exercise tells us about the U.S. news media: its political leanings, its philosophical allegiances and its sickening double standards.

Tuesday, July 19, 2011 8:18 pm

This is all proof, I guess, that Eric Cantor is a bigger [expletive] than even Jerry Jones.

Which I would have said violated the principles of simple Newtonian physics, but there we are: Football! Which is, of course, far from the same thing as the Panthers’ having a decent season, but at least the No. 1 overall draft pick is likely to be under contract when camp opens.

Friday, June 3, 2011 11:46 am

Major U.S. newspapers have increasingly shifted their attention away from coverage of unemployment in recent months while greatly intensifying their focus on the deficit, a National Journal analysis shows.

The analysis — based on a measure of how often the words “unemployment” and “deficit” appear in major publications — portrays a dramatically shifting landscape of coverage over the past two years, as the debate over how to fix the federal deficit has risen to prominence and the question of how to handle still-high unemployment has faded from the media’s consciousness.

Yes, large deficits are a serious problem. But they’re a serious problem in the longer-term. Yes, they could cause inflation. But the interest rate on 10-year Treasuries has fallen a full half a point recently, indicating that the markets see no evidence of inflation coming anytime soon.

Meanwhile, tens of millions of Americans are out of work or badly underemployed. They’re experiencing real human misery right now, today. And the Serious Journalists, economically illiterate and morally bankrupt, couldn’t give less of a damn.

One last thing: This isn’t a failure of reporters. Failures this big require the complicity, if not the direction, of editors and publishers.

Like this:

Monday, December 20, 2010 8:43 pm

Having reached a hideous “compromise” with Republicans on tax cuts, sometime soon, possibly in his next State of the Union address, President Obama is going to propose some spending cuts.

The conventional wisdom in Washington is that these cuts will require “tough decisions,” which is code for cutting Social Security. But if you’re one of the people actually making the decision, it really ain’t all that tough:

As you can see, people in the top 40% of earners, and particularly in the top 20%, rely far less on Social Security for their retirement income than do the less fortunate of us in the American majority. (And it’s worth remembering that congresscritters and most prominent DC journalists aren’t just in the top 20%, they’re in about the top 5%.) Conversely, if we go cutting Social Security to try to balance the budget, you can see what kind of damage it’s going to do to the least fortunate in this country.

And the even bigger picture is this: 1) Federal taxation is at its lowest in 60 years relative to GDP, and that was the case even before the recession. 2) Our deficit problem is, to a large extent, a health-care cost problem and is, to an almost complete extent, a combination of a health-care cost problem and ahistorically low tax rates on the highest earners and wealthiest individuals. If we fix health care (which the Affordable Care Act was well on the way to doing) and start taxing the wealthy at anything like historical averages, then most if not all of our deficit problem goes away.

These statements are arithmetical facts. But you won’t hear politicians or DC journalists mentioning them, and now you know why.

Beware those who profess bravery in the face of other people’s suffering.

Wednesday, December 1, 2010 8:22 pm

Mislabeling: We’re freezing some federal pay. The proposal doesn’t affect congresscritters or their employees, nor, so far as I can tell, does it affect employees of the judiciary branch or the military.

Economic malpractice: The biggest problem in the current economy isn’t taxes or the size/cost of government, it’s unemployment. The biggest reason why unemployment is as high as it is, is no one’s spending. The biggest reason for that is that so many people are un- or underemployed (and many others have good reason to think they might soon be). In that kind of trap, history suggests, the best way to create jobs is to stimulate consumer spending. Freezing government workers’ pay does the exact opposite of that, and no one besides the federal sector is in a position to do it at all right now.

Fairness: It is commonly believed that federal employees get better pay than their private-sector counterparts. Nominally, this is often true. However, to do an apples-to-apples comparison, you have to adjust for geography (i.e., cost of living in different regions) and type of work. When you do, you find that federal employees already make about 22% less than their private-sector counterparts. (h/t Andy Brod)

(In)effectiveness: Someone can, and probably will, write a book on this. If your concern is the size of the deficit, you have many other choices, some of which would be not only more effective but also less damaging in the short term to the so-called recovery. The freeze is expected to save perhaps $5 billion a year initially. When deficits are north of $1 trillion, that’s a joke. We’re spending more on war and defense right now than the rest of the world combined, and just to make things more interesting, we’re losing both of the wars in question, politically if not militarily. Defense costs $600B+ annually, and a dollar spent on defense creates fewer jobs than a job spent on civilian pursuits. Like Willie Sutton, we need to go where the money is. You could enact real health-care reform and save a boatload (and any serious deficit-reduction plan is going to have to do that because health care is the main deficit driver long-term). You could raise top marginal income tax rates even back to the level where they were when Clinton was president. If you were really serious about cutting the deficit, you could raise them back to the stratospheric levels of the prosperous Eisenhower era and even enact a wealth tax to go after some of what the banksters stole.

For Obama to propose this freeze as a serious deficit-reduction step goes so far beyond unseriousness that it calls his basic intelligence or his basic ethics into question. In fact, anyone who says this is a meaningful step toward deficit reduction, let alone prosperity, is either stupid or lying.

I have long believed that the Congressional Budget Office is staffed by robots — not because of the quality (or lack thereof) of their work, but because I think carbon-based life forms would be unable to respond to idiotic question after idiotic question from congresscritters and their staffers, day in and day out, year in and year out, without allowing at least a modicum of snark to seep into their reports and responses. And yet, as with the watchdogs of the Governmental Accountability Office, they manage to continue to produce reports and analyses from which every last bit of partisanship, emotion and edge has been thoroughly expunged.

If you think I exaggerate, consider the recent question posed by the felicitously named Sen. Mike Crapo, Republican of Idaho (flagged by Sarabeth at 1115.org): If passing certain provisions of the Affordable Care Act was estimated to reduce the deficit by $455 billion over 10 years; what effect would repealing these same provisions have on the deficit?

Picture, if you will, the CBO office in which this communication is first received. Normal, carbon-based life forms would be saying things to an imaginary Crapo like, “OK, Mike, it’s like this. See this cookie? This cookie is the part of the deficit affected by the act. If we enact the act [holds cookie behind back], the cookie goes away. But if we then repeal the act [brings hand forward again], the cookie comes back. Got it?”

But because normal, carbon-based life forms aren’t involved, instead we get this:

Finally, you asked what the net deficit impact would be if certain provisions of PPACA and the Reconciliation Act that were estimated to generate net savings were eliminated—specifically, those which were originally estimated to generate a net reduction in mandatory outlays of $455 billion over the 2010–2019 period. The estimate of $455 billion mentioned in your letter represents the net effects of many provisions. Some of those provisions generated savings for Medicare, Medicaid, or the Children’s Health Insurance Program, and some generated costs. If those provisions were repealed, CBO estimates that there would be an increase in deficits similar to its original estimate of $455 billion in net savings over that period.

And then there’s this lagniappe, which I am not making up: Crapo is considered such a whiz on this subject that his party has made him the ranking minority member on the Senate Finance subcommittee on healthcare.

For some time now, American investors’ fear has been that the Chinese owned so many T-bills that if they sold a bunch at once, interest rates (bond yields) would have to climb dramatically for those bills to find buyers, with horrible consequences for U.S. credit markets.

Thing is, as Charles Hugh Smith reports, the U.S. stock market is now so widely (and correctly) perceived as a rigged game that many American investors have gotten out of stocks and into Treasury bonds — so many that the leverage of the Chinese over U.S. finances has been significantly diluted:

But a funny thing happened to the “nuclear option” story: American investors have absorbed almost $4 trillion in U.S. Treasuries, making domestic owners the largest holders of Treasuries. China’s holdings, as vast as they are, are now a modest percentage of domestic owners–as little as 25%.

This domestic move out of equities and into Treasuries is a sea change with broad consequences. Hundreds of billions of dollars has been pulled out of U.S. equities and dumped into low-yield Treasuries. For context, recall that domestic U.S. assets (real estate, bonds, equities, and other marketable capital) is around $52 trillion.

So owning $4 trillion in Treasuries–more than all non-U.S. owners combined, including China, Japan and the Gulf Oil states–does not require that great a percentage of U.S. capital. Even if U.S. owners absorbed another $4 trillion, that would make Treasuries less than 20% of total capital.

There are limits to U.S. debt growth, however, and it is those limits which constitute “the nuclear option.” The U.S. could readily absorb the entire Chinese portfolio ($1.2 trillion), but what it cannot absorb is $1.4 trillion in annual deficits, year after year. In other words, if debt is a “nuclear” weapon, the U.S. will have to set the weapon off itself by borrowing more than it can support out of national income.

If the U.S. economy melts down due to over-borrowing, we have nobody to blame but ourselves.

Of course, the deficit hawks claim that that’s where we’re headed right now. The other side of that argument — and the correct side — is that we need to be running deficits in the short term to get people back to work (more people working and paying income taxes and buying stuff and paying sales taxes, and fewer receiving unemployment checks, also will help reduce the deficit), and we need to be directing that spending toward means of increasing our future productivity so as to generate the wealth needed to bring deficits back under control and pay down debt long-term.

Now, while it’s good that China no longer has the capacity to blow up our economy — which has positive ramifications for everything from our relations with Iran and North Korea to the security of Taiwan — we also don’t want things to veer too far in the other direction:

… if China’s export market implodes and its trade surplus disappears, the central government will have trouble creating the jobs needed to maintain its power.

If China launches its “nuclear option,” the market might be roiled for a short period of time, but their share of the total Treasury markets is simply too small now to be “nuclear.”

Perhaps the real “nuclear option” here is the potential for the U.S. to restrict China’s imports to the U.S. market. Should China’s exports dry up, it will face domestic turmoil on a scale few can imagine.

Tiananmen Square showed us that the Chinese government has the will to deal ruthlessly with domestic turmoil. But that was primarily a political movement. But if tens or hundreds of millions of Chinese rise up because exports have fallen off so badly that they can no longer afford food, Beijing may find itself faced with a situation it cannot shoot its way out of … not solely against internal targets, anyway.

Monday, August 23, 2010 5:55 pm

… but Zero Hedge guest poster Gonzalo Lira does. I find his how more plausible than his why, and I agree with him that IF it happened, some sort of dictatorship likely would be in our future. But he hasn’t sold me on the notion that hyperinflation before the end of 2011 is inevitable or even likely.

Governmental foot-dragging has its intended effect: Tom DeLay walks free. There are no consequences. There is no accountability. Rule of law? Ha.

The Internet will be the death of the music bidness as we’ve known it. Of course, no one who has known it will shed a tear, but that doesn’t mean the bidness is going down without a fight. Now they’re partnering with the National Association of Broadcasters, another powerful lobby, to try to get the government to mandate the inclusion of FM radio in future cell phones. Good luck with that. Oh, and die already.

The question isn’t why “Dr.” Laura Schlessinger “quit” her radio show after dropping about 11 N-bombs. The question is why any responsible broadcaster ever allowed someone with such obvious mental problems on the air dispensing advice in the first place.

The $75 billion Home Affordable Mortgage Protection Act is a bust … because Congress, after approving the money, did nothing to ensure that bankruptcy judges would use so-called “cramdown” provisions to make sure the money would do what it was supposed to do. What has happened instead has left a lot of homeowners even worse off than if the government had done nothing and has hampered the recovery of the housing market. And the administration hasn’t bothered to try to get Congress to do the right thing. Heckuva job all the way around.

Robert Frank has an interesting proposal that could help both government and consumers: The government should buy up consumer debt, on which consumers are paying 20% and up, and charge consumers 8%. This would put more disposable income in consumers’ hands and give the government a substantially better return on its investment than the 2.8% or so that 10-year bills currently are paying. It makes so much sense that there’s zero chance Congress will pass it because it would hurt deny banks their current flow of blood money.

COOL (as it were): Scientists are working on a way to use carbon dixoide and certain kinds of bacteria to convert crude oil into cleaner-burning methane — while the oil is still in the ground. A separate effort is working on using solar power to convert CO2 to carbon, or carbon monoxide to, in turn, synthesize hydrocarbon fuels.

I have found my Official Anthem for the Summer of 2010. Unfortunately, it’s a bit too R-rated to link to, but I’ll give you a hint: It’s by Cee-Lo, from his forthcoming album.

The U.S. Chamber of Commerce has apologized for a blog post suggesting that the male-female wage gap and the glass ceiling aren’t real problems, which might actually mean something if it would apologize for everything else it has said and done in that same vein for the past several decades. But it won’t, so it doesn’t.

The American Family Association apparently believes our soldiers in Iraq died for nothing. Actually, so do I, inasmuch as that war was illegal from the git. But you know why the AFA believes it? Because Iraq is not a Christian nation.

Would someone who considers him/herself a deficit hawk and supports extending George Bush’s tax cuts for millionaires please explain to me how we can afford to do that but cannot afford to put people to work?

A priest, a rabbi and an imam walk into an Islamic center two blocks from Ground Zero. The bartender says, ‘What’re you drinking?’ and the imam orders him beheaded because sharia law dhimmitude Allahu Akbar alalalalalalalalala flabberty jabberty jabber etc. etc.*

You’ve been a great crowd! We’re here all week!

*Also the priest molests the bartender’s kids and the rabbi drinks their blood.

Wednesday, July 28, 2010 10:25 pm

Avedon Carol’s Sideshow:but she has it formatted as a blockquote and it’s not clear from the other links in the post where this passage comes from. So I don’t know who said this. (UPDATE: Avedon e-mails: “Psst! That was me doing one of my ‘suggested fliers you should print out and distribute to your neighbors’ things. So I wrote it.” So I’m happy to set the record straight.)

But more people need to be saying it, and, dammit, somebody needs to be saying it who actually is in a position to do something about it:

You worked hard and played by the rules, and now people in expensive suits who sat in offices recklessly gambling with other people’s money want to stop you from being able to retire.

They exported jobs to other countries and made it harder to start new businesses to create new jobs. They slashed government spending to the point where even schools are closing. They failed to honor contracts that said they would put money into your pension fund, and now there is no pension fund. And now they want your unemployment insurance so they can gamble that away, too.

They say you need to tighten your belt to pay for their mistakes.

Well, why should you?

You paid for insurance to protect you from this. Demand what you paid for.

Social Security: You paid for it. We have the money. You earned it. You deserve it. And they don’t.

We don’t have a deficit problem. We have a financial problem, oh, yes, but we do not have a deficit problem.

What do we have?

We have, first, a health-care financing problem. And that problem is caused overwhelmingly by the inefficiencies in our private-sector health-care system, not Medicare or Medicaid or VA health care.

We have, second, a fighting-two-unnecessary-wars-at-once problem.

And third, we have a problem with a small fraction of the wealthiest Americans, who are collecting all the economic gains there have been to collect in the past decade, who are paying taxes at the lowest rates in 30 years and who still want more, more, more. Not surprisingly, there is significant overlap between the “people in expensive suits” mentioned above, the people supporting these wars, and the people in this group of taxpayers.

The reason they’re saying we have “a deficit problem” is that, having taken pretty much everything else of yours that they can take — your retirement savings, your home value, money for your kids’ education, your salary (if you’re like most Americans, you and your spouse combined make today what you alone would have made for the same work a generation ago) — they have a problem: They’re running out of things to take. Social Security is the last big target out there, so they want to take your Social Security, too.

Well, screw them sideways; they’ve already taken more than enough. It is time for them to start giving back.

First, do nothing: that is, let Bush’s 2001 and 2003 tax cuts for the wealthy expire.

Second, eliminate the preferential tax treatment for capital gains, benefits of which flow overwhelmingly to the very wealthiest Americans. It’s time for these free-marketers to see what happens when we let the market decide the best allocation of capital.

Third, raise income taxes on the wealthy. A lot. The top tax rate under that socialist Eisenhower was 91%. I don’t think we actually need to go anywhere near that high, but an effective 15% tax rate on the five millionth dollar of income is a freaking joke.

Fourth, institute a wealth tax. Damn right I’ll go there. We need to put people back to work AND we have enormous amounts of work to do in infrastructure — everything from higher education to dams to the Internet to the power grid — if we’re going to have a prosperous future. The companies to whom we exported our computer-making jobs 30 years ago are also the same companies eating our lunch now on battery technology, so we’ve got a lot of lost ground to make up.

Fifth, single payer. Right now. Put the private medical-insurance companies out of business and let’s find more efficient, productive uses for that capital than insurance-exec CEO bonuses while the poor end up using the ER, and very inefficiently at that, for primary care.

Finally, let’s stop sitting around pretending that our problems are so huge that there is nothing we can do about them. There is plenty we can do about them. And most people in Washington know it. But the wealthy have so completely bought the government that it’s more rewarding for individuals in government to pretend we’re helpless than to do the right thing for the people for whom they supposedly work. This is the elephant in the room — see what I did there? Although Democrats are on the take as well — that the so-called liberal media won’t talk about.

The calculator begins with the baseline that if nothing much changes, then by 2020, the national debt will be 85% of GDP. If you want to follow the Willie Sutton philosophy and go where the money is, the only single items things that take big chunks (5 percentage points or more) out of the debt over the next 10 years are:

The Fed buying/holding $2 trillion in debt: gets debt down to 71% of GDP.

Negotiating Medicare drug prices: 75%

Financial Speculation tax: 75%

Allow all (Bush-era) cuts to sunset: 78%

Quick end to Iraq/Afghan wars: 80% of GDP.

I don’t know enough about the ramifications of the Fed’s buying/holding that debt to endorse it. Negotiating Medicare drug prices we definitely should be doing and that should have been incorporated into health-care reform, Big Pharma be damned. A financial speculation tax is a good idea; markets need to be allocating capital for productive long-term investment, not quick profits. Sunsetting the Bush cuts makes perfect sense; those cuts account for about a third of the current size of the deficit and were ill-advised from the start. And getting out of Iraq and Afghanistan is such a moral and practical imperative that the economics, though significant, are almost beside the point.

There are other options on the calculator, many of them attractive, but most aren’t going to make more of a difference than a point or two. Still, keep in mind that I’ve addressed each of these items in isolation. Although enacting some of them together might well have effects that wouldn’t occur if only one were enacted, together they’ll also substantially reduce the projected debt load. And we can probably find a politically acceptable approach that will bring the debt down substantially without putting seniors on a cat-food diet.

Yesterday the Post apparently published an article by the Fiscal Times. The Fiscal Times is published by Pete Peterson, the billionaire raising such hell about the deficit because his agenda is cutting social spending as an end in itself, not just as a means to long-term deficit reduction, a fact the Post didn’t see fit to share with its readers.

That’s bad enough. What’s worse is that U.S. deficits have far less to do with social spending per se than they do with our absurdly high-cost and inefficient health-care system. Adopting any of a number of other Western health-care financing systems, which run the gamut from total socialization to private, nonprofit funding, would generate long-term surpluses rather than deficits even before we touched other social spending, let alone military spending or our absurdly regressive tax system.

This information is readily available to the public, so we must presume that the editors of The Washington Post are either idiots or corrupt. And call me crazy, but I’m going to presume further that they’re not total idiots.

UPDATE: Peterson is also behind the group America Speaks, which will be holding meetings across the country this weekend to discuss what to do about deficits. As you might expect, the group’s framing has been constructed to try to build consensus around cutting Social Security and Medicare.

Friday, June 18, 2010 8:13 pm

One of the seemingly endless arguments in favor of cutting Social Security to help get deficits under control is that the population is aging and there will be fewer wage-earning workes supporting more Social Security recipients in coming years. It makes intuitive sense, what with the pig-in-the-python Baby Boomers heading into SocSec territory and all, so even I thought this argument, at least, was probably true. But was it?

Well, Rule 5 of investigative journalism is — say it with me, kids — do the math.

At a time when we have the greatest oversupply of labor since the Great Depression, we are now supposed to be terrified that in a few very short years we will not have enough labor. Is that possible?

Not if we know arithmetic. The NYT gave us a little glimpse of this horror story in its Economix blog today. It showed that the ratio of dependents (defined as people over 64 or under 20) to working age people (those between the ages of 20 and 64) is supposed to rise from 0.67 today to 0.74 in 2020, and 0.83 in 2030; pretty scary, right?

Well suppose we defined a slightly different dependency ratio. This will be the ratio of people who are not working to the people who are. The idea being that people who are working must support the people who are not, regardless of their age.

In 2010, this ratio stands at 1.22. We have 139.4 million people working and 170.1 million not working. However, if we assume that we get back to near full employment and the labor force grows as the Congressional Budget Office projects and population grows as the Census Department projects, this dependency ratio will have fallen to 1.05 in 2020 and then rise to 1.07 by 2030. So, are we scared yet?

So if I understand him correctly, that means the biggest problem isn’t the aging population, it’s the lack of jobs.

Nearly half of the unemployed—45.9%—have been out of work longer than six months, more than at any time since the Labor Department began keeping track in 1948.

Even in the worst months of the early 1980s, when the jobless rate topped 10% for months on end, only about one in four of the unemployed was out of work for more than six months.

Overall, seven million Americans have been looking for work for 27 weeks or more, and most of them — 4.7 million — have been out of work for a year or more.

This is not just a question of economics, although it is that. It also is a question of right and wrong. I’ve got to think Jesus would be more worried about the people who are losing their homes, and even having trouble feeding their families, than he would be that Treasury might have to pay 3.5% instead of 3.3% on its 10-year bonds at next week’s auction.

Tuesday, June 1, 2010 10:54 pm

It is the prevailing conventional wisdom among both Washington politicians and Washington “journalists” that despite 10% unemployment and near-zero inflation, we must rein in U.S. deficits very soon or else the bond market will be destroyed.

Only here’s the thing (Rule 5 of investigative journalism: Always do the math.): The U.S. government is having no trouble finding buyers for its bonds, despite the fact that right now they’re paying historically low rates of interest. The Washington Post’s Neil Irwin, who will probably be sent to bed without supper for this misbehavior, highlights the inconvenient truth:

The U.S. government debt is rising inexorably, according to the conventional wisdom in Washington, and the political system is too paralyzed to take unpopular actions to rein it in. Privately, many policymakers take it as a given that the situation will change only when the nation faces a Greek-style fiscal crisis.

But apparently nobody told the people who lend the U.S. government money. On Friday, they were willing to hand over their cash to the Treasury for 10 years for 3.3 percent interest, a level so low it implies they consider the United States among the safest investments in the world. Collectively, those investors — think mutual funds, pension funds and foreign central banks — could lose hundreds of billions of dollars if they’re mistaken and the United States has a debt crisis.

It is the Beltway vs. the bond market, and they can’t both be right.

The problem is that the deficit commission in particular and most of the anti-deficit movement in general is being driven right now not by hysteria, but by the purely political, and, frankly, greedy desire to cut entitlements — to screw middle-class and poor people. And while it’s becoming more acceptable to admit that, it still isn’t all that acceptable, thank God, so people use “deficits” as the excuse.

And the Washington media, by and large, and perhaps most prominently the Washington Post’s editorial page, let them get away with it.

Without an accurate grasp at the start of a spending program as to its most likely cost, schedule, and performance, how can decision makers understand the future consequences of their actions? Today, an ethic continues to predominate in the Pentagon that consistently paints an inaccurate picture – one that is biased in the same, unrealistic and ultimately unaffordable direction. The errors are not random: actual costs always turn out to be much higher than, sometimes even multiples of, early estimates. The reason is simple; the Pentagon doesn’t know how it spends its money. In a strict financial accountability sense, it doesn’t even know if the money is spent. This incomprehensible condition has been documented in hundreds of reports over three decades from both the Government Accountability Office (GAO) and the Department’s own Inspector General (DOD IG).

He’s right. We should audit the Pentagon, we should ensure we’re spending only what we need to and not losing money to waste, fraud or abuse.

But even if we did all that, we’d still have a military budget we can’t afford. Even bigger steps are needed, starting with getting us out of Iraq and Afghanistan and continuing with a sober, complex, rational analysis of our legitimate defense needs and an understanding of our role and limits as a world power. Every great world power in history has succumbed to imperial overstretch, and we’re doing it right now. Continuing to spend more on our military than the rest of the world combined is not sustainable. We’ve got to cut. A lot. Soon.

Over the past week, top White House officials have been floating a trial balloon for their strategy on the economy. At its core is a decision to put deficit reduction ahead of job creation.

The premise is that the bond markets and allied deficit hawks are demanding action to cut the budget, that Obama lacks the votes in the Senate for a serious jobs initiative, and that polls show voters care more about deficit reduction than about jobs.

So the plan, modeled closely on the work of the Peter G. Peterson foundation and the anticipated report of the president’s own fiscal commission, is a deal that includes cuts in Social Security plus a new Value Added Tax (VAT), in order to get deep cuts in the deficit. As a sweetener to get Republicans to back the VAT, White House officials would cut the corporate income tax.

This is nuts both in terms of whether it actually would help the economy AND in terms of whether it would help Democrats politically. It’s like Obama is bent on repeating all his biggest mistakes in the health-care debate.

Of course, there is some good news:

In the end Republican opposition to a VAT is likely to save the Democrat budget hawks from themselves.

We may end up with a mirror image of the health-care endgame, where the choice was between an unappetizing bill and an even more unappetizing status quo. Only here, the choice may be between an unappetizing status quo and an even more unappetizing package of recommendations from Pete Peterson’s anti-Social Security committee that Congress would have to vote up or down. Fun.

New York Times columnist David Leonhardt told readers today that the problem of the debt is “we, the people.” Is that so?

Was it we the people who were too dumb to see an $8 trillion housing bubble and recognize that its collapse would wreck the economy? No, that was the job of the great Maestro Alan Greenspan and his sidekick Ben Bernanke, the brilliant scholar of the Great Depression. It was also the job of all the economists who do research and opine to the public on the macroeconomy. Virtually all of these highly educated highly intelligent economists either did not see the bubble or insisted it was not worth their time.

Our deficit today is due to the collapse of this bubble. There is no dispute about this. If there had been no bubble and the economy was still chugging along with 4.5 percent unemployment, the budget would either be balanced or close enough that no serious person would be expressing alarm (check out the pre-crisis CBO projections).

Is our huge deficit a problem today? Not if you think people should have jobs. Private sector demand has plunged because of the collapse of the bubble. If the public sector does not fill the demand gap with deficit spending, then we have less demand and fewer jobs. That’s worth saying a few hundred thousand times since the deficit hawks have filled the airwaves and cyberspace with so much nonsense.

People who want smaller deficits want fewer jobs – that is the way the economy works right now. There is no plausible story through which cutting demand from the public sector will generate more jobs in the private sector.

How about those scary long-term deficit stories? It’s all health care; it’s all health care. Those who know arithmetic know this.

The deficit hawks tell us we can’t fix our health care system. What they actually mean is that they don’t want to confront the powerful interest groups that cause the United States to pay two or three times as much per person – with no obvious benefit – as people in other wealthy countries. It is easy to devise mechanisms that will get our costs more in line with other countries (e.g. this or this).

Because such measures threaten the incomes of powerful interest groups the politicians won’t push them. And, because they have not been endorsed by enough elite economists (you know, the folks that couldn’t [see the] $8 trillion housing bubble), elite journalists will not talk about them either. Instead, they will blame ordinary workers for thinking that they should be able to get a decent retirement and have the same sort of health care coverage as people in every other wealthy country.

You say we face tough choices? The wusses at The New York Times can’t handle tough choices. Neither can the ones in Congress or the White House, to say nothing of those on Wall Street.

Before making claims of requirements not being met or alleged “gaps” – in ships, tactical fighters, personnel, or anything else – we need to evaluate the criteria upon which requirements are based and the wider real world context. For example, should we really be up in arms over a temporary projected shortfall of about 100 Navy and Marine strike fighters relative to the number of carrier wings, when America’s military possesses more than 3,200 tactical combat aircraft of all kinds? Does the number of warships we have and are building really put America at risk when the U.S. battle fleet is larger than the next 13 navies combined, 11 of which belong to allies and partners? Is it a dire threat that by 2020 the United States will have only 20 times more advanced stealth fighters than China?

These are the kinds of questions Eisenhower asked as commander-in-chief. They are the kinds of questions I believe he would ask today. And they are the kinds of question that we must all – civilian, military, in government and out – be willing to ask and answer in order to have a balanced military portfolio geared to real world requirements and a defense budget that is fiscally and politically sustainable over time.

*And by the military, he, and I, mean Congress.

These are, indeed, the kinds of questions Eisenhower asked as commander-in-chief. These are NOT the kinds of questions that are being asked as the Simpson-Bowles deficit-reduction commission begins its discussions, it is reasonable to assume, although it is hard to know for sure because all the promised openness is going on behind closed doors.